Real Estate Agents and Lenders Say 2023 Could Bring the Return of a Buyer’s Market
With rising mortgage rates and inflation, Central Ohio home sellers may lose the upper hand later in the year.
In the waning months of 2022, the balance of power shifted away from the seller and moved toward the home buyer in the Central Ohio real estate market. That trend is likely to continue for the first half of this year, along with a reduction in the number of homes being sold, because buyers are skittish about the economy due to rising mortgage rates and inflation.
Those changes, with potential buyers staying away and home prices stabilizing, could lead in the second half of the year to an increased inventory in what has long been an extremely tight market, say local real estate agents and bankers.
Real estate company Redfin has predicted that nationally, existing home sales will sink this year to their lowest levels since 2011, falling by 16 percent. Despite regional rankings for being the fifth-hottest market in the country, the Columbus area won’t be immune to this shift, says Joseph “Butch” Wahlsmith, the local Redfin principal listing agent. “Would-be buyers are pressing pause due mostly to affordability challenges, including high mortgage rates, still-high home prices, persistent inflation and a potential recession,” Wahlsmith says. “People will only move if they need to.”
Rising rates clearly spooked potential buyers as 2022 faded, with closings down by nearly 2 percent from the previous year. In March, interest rates on a 30-year fixed loan were just under 4 percent. By mid-December, they had risen by more than 2 percentage points, says Rebecca Gray, vice president at Fifth Third Bank and a loan originator ranked in the top 5 percent of the country. “The person who earlier could have afforded a $500,000 house can now only afford a $400,000 house,” Gray says. “And people are concerned about inflation.”
But that hesitation could also be a silver lining this year in the local market, which has been plagued in recent years with way more demand than available housing. “There’s a lot of people falling out of the market because they no longer qualify for loans, so inventory will improve in 2023,” Gray says.
Homes now stay on the market 40 percent longer than they did a year ago—on average 15 to 21 days—and buyers held a lot more sway by the end of 2022. “Now buyers want to negotiate more and are no longer willing to overpay to get a house,” says Sara Walsh, a real estate agent at eXp Realty and a former Columbus Board of Realtors president.
Even though home sale prices were down by just under 2 percent at the end of last year, they are not expected to go into a serious decline this year. “People would be better off buying or at least preparing to buy now,” Walsh says. “No one is predicting a real estate crash.”
In fact, home values should continue to appreciate moderately this year by 14 to 16 percent, says Fifth Third Bank’s Gray. “That will be driven by supply and demand, and there’s still the huge impact of Intel coming here,” she says.
This story is from the February 2023 issue of Columbus Monthly.